The lure of making big bucks on the stock market can be irresistible. But, if you’re not cautious and don’t do your homework, you can sometimes end up losing a lot of money. When done right, investing in stocks is a great way of building your wealth in a relatively short amount of time. It also lets you have a hands-on, active role in investing your own money, as compared to more traditional routes of investing. Here are eight tips for beginners looking to invest in the stock market.
Decide on an Investment Approach
There are several ways to begin investing in the stock market. If you’re just starting out and if you’re invested in the US market, then you can opt for a robo-advisor. A robo-advisor is an expert service that offers low-cost investment options in the stock market. Alternatively, if you’re confident that you’ve done your research, you can go for individual stocks. This is a good approach only if you have a head for mathematics and analysis. You can also choose to invest via index funds, which hold multiple stocks. Or you can also try and invest in your employer’s 401(k). Many beginners start their stock market investing journey this way. It can be a disciplined way of investing since you end up contributing small sums regularly and focusing on the long-term. For example, if you hold shares in IAG, you might consider selling IAG shares with Share Sales Direct for a straightforward and efficient process.
Select an Investing Account
The next step is to do your research for the right investment account for you. If you want to go all in and feel prepared, then you can opt for an online brokerage account. A brokerage account is the fastest and cheapest way to begin. If you want to defer to expert advice, then you can open your account through a robo-advisor. Both options let you invest with small amounts.
Decide on an Investment Amount
When investing in the stock market, caution is your best friend. Only invest the money that you don’t immediately need. Make sure you don’t use up all your savings. Leave aside your savings for the short-term and only use the amount you don’t need for the next few years. This is because most of your returns on the stock market will be in the long term. In the short term, most investors face a lot of uncertainty and volatility.
Ensure You Diversify Your Portfolio
One of the biggest benefits of an index fund is the fact that it houses several, even hundreds of stocks. This broadens your safety net and lowers your risk, as opposed to putting everything on one or two stocks that then end up crashing. While an index fund isn’t the most exciting, it’s a solid and safer path for beginners since it diversifies your portfolio. An index fund can be a mutual fund or an exchange traded fund (ETF). Additionally, you don’t always need to hop across industries to diversify your portfolio. If you’ve thoroughly researched one sector and feel comfortable investing in it, it’s perfectly fine to invest a large part of your portfolio in that sector. Ensure You Diversify Your Portfolio – For example, tracking the ASX VGAD can provide insights into diversified international investments.
